Indian Multi-national companies continue global march: ISB Study

Top Indian transnational companies (TNC) continued their aggressive globalisation march by showing double-digit growth in international revenue.

MUMBAI: Top Indian transnational companies (TNC) continued their aggressive globalisation march by showing double-digit growth in international revenue, assets and employees despite the general dip in aggregate overseas FDI in 2012, according to a study conducted by the Indian School of Business (ISB).

"We anticipate that the extent of globalisation will only increase further as India becomes more integrated with the rest of the global economy and as Indian companies gain more confidence by acquiring experience in overseas markets," says Professor Raveendra Chittoor, who conducted the study along with Deepak Jena.

The recent years have seen the rapid emergence of a number of firms from developing countries as significant players in global markets. The study that ranks India's TNCs based on their international asset size shows that the majority of the companies on the list are affiliated to business groups, a phenomenon unique to emerging economies, with companies from the Tata group dominating the list.

This is the second year of the survey and ranking by ISB. The ranking methodology is based on the framework (TNI) developed by the United Nations Conference on Trade and Development (UNCTAD). The UNCTAD index uses a combination of three measures to determine the degree of internationalisation of companies — percentage of international assets, percentage of international revenues and percentage of foreign employees.

The study shows that India's top TNCs have a balanced presence in developed and developing markets. It shows emerging market MNCs do not necessarily have a preference for expanding into culturally closer and low technology markets of developing countries, but tend to look beyond for growth.

The study also shows that India's top TNCs follow unconventional internationalisation paths, sometimes preferring to expand first into developed markets rather than into other developing economies. They display risk-taking behaviour and make large investments and resource commitments even in the initial phases of their international expansion.

While the proportion of international assets and revenues of top Indian TNCs is somewhat comparable to that of top global TNCs, Indian companies lag when it comes to employing a global workforce.

The top 15 TNCs with assets of $500 million or more earned 75% of their total revenues from global operations, held 57% of their total assets overseas, and employed 20% of their total workforce abroad.